Tuesday, November 20, 2012

Australian and Canadian Dollars Are Now Officially Reserve Currencies

The Australian and Canadian dollars, the world’s
leading commodity-rich currencies, are being formally classified as
official reserve assets by the International Monetary Fund, marking the
onset of a multi-currency reserve system and a new era in world money.

In a seemingly innocuous yet highly portentous move, the IMF is asking
member countries from next year to include the Australian AUDUSD+0.6277%
and Canadian dollars USDCAD-0.4432%
in statistics supplied by reserve-holding nations on the make-up of
their central banks’ foreign exchange reserves. The technical-sounding
measure, reflecting growing diversification of the world’s $10.5
trillion of reserves, is likely over time to exert wide-ranging impact
on world bond and equity markets.

Expanding by two the list of officially recognized reserve assets from
the present five — the dollar, euro, sterling, yen and Swiss franc —
signals a new phase in the development of reserve money. For most of the
past 150 years, the world has had just two reserve currencies, with
sterling in the lead until the First World War, and the dollar taking
over as the prime asset during the past 100 years.

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